Confidential statements made to the Government's chief watchdog during a high-profile investigation may be released in a move that could influence whether witnesses speak out in future cases.

A top-level legal argument has developed over witness statements in the State Services Commission (SSC) inquiry into the spending of former Waikato District Health Board chief executive Dr Nigel Murray.

The SSC, which is in talks with Privacy Commissioner John Edwards over the issue, told the Herald his decision would have significant ramifications for future state sector investigations.

The legal argument began when Murray's lawyers complained to the Ombudsman and the Privacy Commissioner over the SSC's failure to provide the statements.

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Peter Cullen Law requested the statements of the 12 witnesses and any questions asked of them soon after lead investigator John Ombler released his Inquiry findings on March 22.

The four-month inquiry found Murray's spending of $120,000 of taxpayer money on travel and accommodation was either unjustified or unauthorised and the case was referred to the Serious Fraud Office.

In an email dated April 18, 2018, to one of the witnesses who gave evidence, SSC senior adviser Jane Paterson said the witnessses' original conversation with the SCC investigators took place on the basis it would be treated in confidence and could be used only in the inquiry.

She said the SSC declined the request under the Privacy Act from Murray's lawyers after considering that an exemption applied to evidence gathered in the inquiry.

A spokeswoman at the office of the Privacy Commissioner said he had not yet expressed a view about whether the statements were confidential, and had not ordered their release.

She said the commissioner would not comment publicly on the situation but pointed out that section 2(1) (b) (xii) of the Privacy Act related to the definition of an "agency".

"If a body does not fall within the definition of an agency, it is not covered by the Privacy Act. The effect of this is that an individual would not have a legal right to seek access to personal information, as he or she does under the Privacy Act."

A Commission of Inquiry is one exception that is not covered by the Privacy Act, but it remains to be seen if the Ombler Inquiry is regarded in the same way.

A spokesman for the SSC confirmed it was engaged with the Privacy Commissioner following a request to provide full witness statements.

"The Privacy Commissioner's decision on this matter is significant and could affect the Commission's ability to undertake its investigations effectively," the spokesman said.

Former Labour MP and one of the 12 witnesses, Sue Moroney, said she gave information to the inquiry with the expectation it was confidential and feared releasing it would set a dangerous precedent.

"What it means is the State Services Commission is not going to be able to offer people confidentiality in terms of future public inquiries.

"People who work in the public service will feel they won't be able to speak openly so it's an attack on democracy."

Moroney said she wasn't afraid of her notes being released but believed other witnesses would be worried.

The 12 witnesses included the three senior DHB staffers who blew the whistle on Murray, his executive assistant, former board chairman Bob Simcock, some board members, and others involved with his recruitment and employment in Canada.

"I think it is precedent-setting," Moroney said. "People have the right to disclose information to the SSC. It really hampers the SSC's ability to conduct proper investigations."

However Calum Cartwright of Peter Cullen Law said they had always maintained their client was entitled to the statements "in accordance with the principles of natural justice and fairness".

"Indeed, we consider the investigator's decision to receive statements confidentially has breached Dr Murray's right to a fair investigation."

The Association of Salaried Medical Specialists executive director Ian Powell said he only discussed information he previously made public but was concerned about the wider impact.

"There were some people who whistle-blew who were particularly courageous and it would be very sad to see those people targeted by a revenge motivation towards people who are very vulnerable."

PSA organiser Daryl Gatenby said the union would be concerned if the situation discouraged workers from speaking out. Witnesses in the Murray case might not have disclosed information had they known it was not confidential, he said.